## **Learning Outcomes**

After reading this article, you will be able to identify the need for coding in business documentation, explain document flows between departments, summarise document filing methods, and describe authorisation and retention procedures for accounting documents. You will also recognise why secure handling and controlled approval of documents is critical for effective accounting records and exam success.

## **ACCA Recording Financial Transactions (FA1) Syllabus**

For ACCA Recording Financial Transactions (FA1), you are required to understand the steps businesses take to ensure documentation and records are accurate, secure, and accessible for both daily operations and future reference. In particular, focus your revision on:

- The reasons and methods for coding accounting transactions and documents
- How documents move through the business and the points of approval
- Techniques and systems for filing paper and digital documents
- Procedures for authorising transactions and controlling access to authorisation
- Retention requirements and policies for accounting records and supporting documents
- Security risks and controls related to document handling and record storage

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. Why is it important for every sales invoice and credit note to have a unique code or number?
2. Which person is usually responsible for the final authorisation of a supplier invoice before payment is issued?
3. True or false? All business documents should be retained for at least one year after use, regardless of their type.
4. Briefly explain what is meant by 'segregation of duties' in the context of authorising documents.

## **Introduction**

Well-organised document systems are essential for any business. From coding transactions for accurate entry, through controlled flows across departments, every step must protect against errors, fraud, and loss of records. Exam questions frequently test your understanding of how coding, authorisation, filing, and retention policies work together as part of a robust accounting process.

This article reviews the principles of coding transactions, the movement and approval of documents in accounting, effective filing methods, and the rules for document retention and storage.

> **Key Term: coding system**
> A method used to assign unique identifiers to accounts, documents, or transactions to aid recording and retrieval in the accounting system.

## CODING OF DOCUMENTS AND TRANSACTIONS

Coding ensures each item in the accounting system is uniquely and accurately identified. Coding applies to account codes, customer and supplier references, and all key documents such as invoices and purchase orders.

Codes must be systematic—such as sequential numbers, blocks by account type, mnemonic references, or a mixture. Good design allows for future expansion, easy lookup, and reduces input errors.

> **Key Term: document code**
> A reference (often a serial number) printed or attached to a business document, ensuring it can be tracked and not confused with other documents.
>
> **Key Term: chart of accounts**
> The complete indexed list of account codes used by a business in its general ledger.

### **Worked Example 1.1**

A business, Alpha Ltd, issues purchase orders each month. Orders are numbered PO001, PO002, etc. Last month, two orders were missing in the sequence. What action should be taken?

> **Answer:**  
> Gaps in a document code sequence may indicate lost, unprocessed, or misfiled documents. Alpha Ltd should investigate missing numbers immediately, checking for errors or potential fraud.

## DOCUMENT FLOW AND AUTHORISATION

Every document linked to a transaction—such as a purchase invoice or expense claim—should move between clearly defined steps from initiation to final processing. Each step is intended to confirm accuracy, validity, and approval.

Typical flow:

1. Document creation or receipt (e.g., purchase order, invoice)
2. Department review for accuracy (e.g., matching invoice to order and delivery note)
3. Authorisation by responsible staff (manager or accounts)
4. Entry into the accounting system
5. Filing for future access

> **Key Term: authorisation**
> The formal process where a person with the proper authority reviews and gives approval to a transaction or document.

Authorisation should be controlled. The person approving must be independent from those who initiated the transaction and from those making payment, to prevent errors or deliberate misuse.

### **Worked Example 1.2**

Jan prepares a claim for travel expenses and submits it along with tickets. Her manager signs the claim form, and then accounts checks it against the travel policy. Who has the final authority to authorise payment, and why?

> **Answer:**  
> The manager is responsible for verifying the expense is genuine and reasonable. Accounts confirm supporting evidence and check for compliance, but the manager's authorisation is key before payment is made.

### **Exam Warning**

Be precise when distinguishing between checking for accuracy and granting authorisation. Only certain staff—those with delegated authority—may legally approve payments or commitments.

## FILING SYSTEMS FOR BUSINESS DOCUMENTS

Once processed, documents require systematic storage so they can be retrieved for queries, audits, or legal reasons. Filing may be manual (paper-based) or electronic.

Key filing methods include:

- Sequential: Documents stored in order of their unique code or date
- By type: Invoices, statements, orders–each in a separate series
- By supplier or customer: Grouped by name or code for quick lookup

Filing policies must ensure that only authorised staff access sensitive or confidential records.

> **Key Term: filing system**
> The structured process and location for storing, referencing, and retrieving completed business documents.

## DOCUMENT RETENTION POLICIES

After entry into the accounting system, business documents—whether manual or digital—must be retained for as long as business, legal, or tax authorities require.

Each type of document (such as invoices, payroll records, contracts) may be subject to different retention periods, often between three and six years. Secure storage is essential—physically or encrypted digitally—to prevent loss, theft, or damage.

Regular archiving policies ensure that only necessary documents are kept easily accessible, and out-of-date records are destroyed securely under policy.

> **Key Term: document retention policy**
> The set of rules governing how long each type of document must be kept before authorised destruction.

### **Worked Example 1.3**

Gamma Co receives a tax authority query relating to a transaction processed four years ago. The relevant purchase invoice cannot be found. What are the consequences?

> **Answer:**  
> Failure to retain documents can result in penalties or inability to prove the transaction's validity. Gamma Co risks fines and potential loss of tax recoveries.

### **Revision Tip**

Always link coding systems, document flow, and retention in your answers. For example, explain that unique document codes aid tracking, secure filing ensures retrieval, and retention policies support audit trails.

## **Summary**

Proper document coding, approval, filing, and retention procedures give businesses control over their transactions and support both routine and exceptional checks. For your ACCA exam, focus on the practical steps, who is responsible at each stage, and the purpose of secure, systematic workflows from document creation to final retention.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Explain why unique coding is essential for documents and accounts
- Outline methods for coding and examples of different code systems
- Describe the typical flow of documents and steps for authorisation
- Identify who is responsible at each stage of document approval
- Describe effective filing methods for business records
- Summarise legal and business document retention rules
- State the importance of secure, controlled storage for both paper and electronic records

## **Key Terms and Concepts**

- coding system
- document code
- chart of accounts
- authorisation
- filing system
- document retention policy

Coding, filing, and authorisation - Document flow, approval, and retention